CUs Help Turn GIs Into Entrepreneurs

Turning to their local credit unions, military personnel are transitioning back into civilian life by starting up businesses such as chiropractic firms, franchise restaurants and even shoe stores.

Some are also taking skills they've learned to become entrepreneurs and in the process are also helping to boost the popularity of a government program that provides special loans to help them start and expand their businesses.

Launched in June 2007, the SBA's Patriot Express program provides loans up to $500,000 with an interest rate generally from 2.25 to 4.75 points over prime depending upon the size and maturity of the loan. Those eligible for the loans include veterans, their spouses and persons in active duty who qualify for the military's transition assistance program.

The SBA said Patriot Express loans are in such demand that the initiative was recently renewed for three more years. More than $560 million in loans have been approved to nearly 7,000 veterans, reservists and their spouses.

"The impact of this program over the last three-and-a-half years has meant thousands of veterans and their families have had the resources to pursue their dreams as entrepreneurs, and at the same time create jobs and drive economic growth at a critical time for our country," said SBA Administrator Karen Mills.

Credit unions have aided in that growth through their participation in the Patriot Express program. Fifty-five of them have approved roughly $38 million in loans as of Sept. 30, according to SBA data.

Leading the way is the $4 billion Randolph-Brooks Federal Credit Union in Live Oak, Texas, with more than $9 million in loans approved. Founded in 1952 to serve Randolph Air Force Base and shortly after, Brooks Air Force Base, the cooperative still has strong ties to the military community even though it has since expanded to serve more than 1,900 select groups and eight underserved communities in the San Antonio and Austin areas.

"It's a good program. It benefits those who have served our country and there's also benefit to lenders through the higher guarantees. So, it's a win, win," said Kenan Pankau, SBA program manager at Randolph-Brooks.

Named the top credit union 7(a) program lender in 2009, Randolph-Brooks has more than $20 million in SBA loans. Pankau said as soon as the agency rolled out Patriot Express in 2007, the credit union immediately signed on. Since then, some of the loans have helped fund franchise businesses while others have expanded mature companies started with skills learned in military careers. Pankau said it might be hard to pinpoint the average loan size but the working capital lines of credit offered tend to fall in the $35,000 to $50,000 range.

"We're seeing a nice mix. Many of them are transitioning out of the military. Even in the San Antonio area, we serve a lot of retirees and there are other businesses located here that serve the military," Pankau said.

The Patriot Express loans can be used for most business purposes, including startup, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases, according to the SBA, with most applications approved within 24 hours. The loans can also be used to recover from declared disasters, to sell goods and services to the government and to prepare a business in the case the owner is deployed.

For the $43 billion Navy Federal Credit Union, 80% of the loans are being used to launch brand new businesses, said Rick Cole, credit underwriter at the Vienna, Va.-based cooperative. With nearly $2.5 million in Patriot Express loans approved, it is the second largest credit union lender in the program. There's another $1 million in the pipeline, according to Cole.

"I think the primary motivation and the reason why the program has been so successful is because it fits perfectly with our membership," Cole said. "It's designed to help military members transition into private life."

Most of Navy Federal's loans range between $100,000 and $300,000, Cole said. Given the credit union's expansive reach nationwide, some of the funds have been used to start businesses in states such as Connecticut, California, Texas and the Atlanta metropolitan area. They run the gamut from technology firms to chiropractic offices, shoes stores and franchise restaurants.

Cole acknowledged that most applicants don't come in looking for the Patriot Express loans. If they don't qualify under normal loan criteria, the SBA gives added security to those who would not otherwise be eligible, he said.

Several other credit unions have been just as active with loan approvals, including the $2.8 billion Redstone Federal Credit Union with $1.85 million approved and the $215 million Self-Help Credit Union at $1.28 million loans approved. Vantage West Credit Union and Centris Federal Credit Union have approved $1.28 million and $1.19 million in Patriot Express loans, respectively.